HomeMy WebLinkAboutAudit Related Procedures 2000 6r i
ar s 6i= a` yes
nt
`exas Stade H041SIR rc ,`
nn
of
�
' f` , �'
+'f Up
:PrepAred,by:
Charles Ha es
e r#fiery Public Accountant
TABLE OF CONTENTS
Recommendations from Audit Related Procedures.............................................I
Items for immediate consideration if one or more properties are given back................3
Consideration for future operations at audit date (The Colony Apartments).................4
Analysis of Net Cash Available for Debt Service (The Colony Apartments)................6
Accounts/Rent Receivable—Analysis—Tower..................................................7
Trial Balance—Colony Apartments...............................................................8
Minimum Interest (ESCROW) Payments Schedule...........................................9
Installment Purchase Obligations................................................................10
Texas Student Housing Corporation
Recommendations from Audit Related Procedures
August 31, 2000
Operational— Related
1) Must improve accountability of each property's operations through the proper use of
a budget. Must improve administrative procedures in relationship to the application
of budget restraints.
2) Capital projects a major improvement, restoration or betterment programs should be
a) planned and structured with cash flow in mind, b) be project based and project
budgeted c) with periodic reviews for controls on actual costs.
3) Should implement a defined procedure or required RFP's (Request for Proposal) on
any major maintenance or capital improvement projects on properties. Industry
standard processes on RFP's should be sufficient to insure that reasonable effort is
made to secure equitable cost on projects.
4) Reserve for replacement accounts have been substantially depleted and need to be re-
capitalized to proper levels in order to secure the integrity of the original intent of the
reserve and installment agreement.
5) No cash flow source is present to pay the minimum payment on the Lodge Co. note.
Only $100,000 of the $300,000 payment was made in 2000. Forum is no longer
operational as far as a revenue producing entity. Minimum expenses still exist for
security guard cost, insurance, taxes and limited maintenance and utilities.
b) More rigid cash control and expenditure processes should be documented and
implemented to further establish fiscal controls.
7) Excess use of Credit Card charges for repairs and maintenance and/or capital expense
items indirectly adds additional cost to vendor charges. We would recommend that
this practice be reviewed for feasibility. No true cash disbursement deferral is gained
by this practice. It was noted that Credit Card (held by SSRS or its owners)were
used for charges to properties other than Texas Student Housing Corporation
properties, which substantially adds to the complexity of accounting and audit
processes of the accuracy of these charges.
S) Cost analysis should be performed on all major maintenance contracts.
i.e.: Fire system, Security system, Elevators, etc. (Specific to Tower)
9) The dorm should be sold or reactivated. Ross should suspend interest or the note
since the property was taken out of service by same.
Page 2-Recommendation
10) An allowance for doubtful accounts on a historical basis method should be
considered. There appears to be a significant amount of uncollected rental
receivables on the Tower from 96/97, 97/98 and 98/99. (See attached analysis
schedule of Tower Accounts Receivable
Administrative
1) Insurance coverage on properties should be submitted for bid bi-annually to secure
the best possible economics on this major expense item.
2) Insurance coverage liability limits should undergo a comprehensive re-evaluation
based on current trends in the student housing market.
3) Operational policies and procedures of Management Company should be updated and
filed with Texas Student Housing Corporation at the beginning of each fiscal year.
4) Recommend that regular meetings be established between Texas Student Housing
Corporation Board and Management Company to review the operations of properties.
Texas Student Housing Corporation
August 31, 2000
Items for immediate consideration if one or more properties are given back—
Clear all intercompany balances using transfers, and elimination's due to/due from an
intercompanies.
Make provisions for honoring existing scholarship liability for future years. Colony
has no food service facilities.
Consider deferred (unearned) dorm rental obligation to students at each facility,
especially the Tower. (See attached Account Receivable/Deferred Revenue Analysis.)
See Colony list of considerations concerning billing of 9 of the Quads"through"the
Tower,the use of the Tower's access to a Credit Card account, and overall guest
house and extended stay record keeping.
- Management fee structure would change.
- Insurance costs would change.
- Potential for filing for property tax exemption may be increased since risk of loss of
A&M management support may be decreased due to the amount of the lost value tax
return for the local area.
Amounts due from and due to SSRS management would be cleared by payment or
demand for payment.
Amounts of unpaid compensated absences for the entity's employees may be liability.
Amounts of unspent insurance loss claim proceeds held, as deferred balance sheet
items would need to be considered in any settlement of accounts.
- Any maintenance contract or agreement obligation must be considered. Fire
protection, sprinkler and alarm system, elevator maintenance, security system
maintenance, landscape services, or consulting/monitoring HVAC system.
- Any escrow of property taxes or insurance must be considered (Colony may have
some escrow currently at February 2001, but it is small due to the time of year. When
taxes have normally been paid on January 31'.
- Any lease agreement minimum amounts due. (Copier and postal system equipment)
Charles Haynes, CPA
Cerltfied Public Accountants
1903 Central Drive, Suite 304
Bedford, TX 76021
817-545-13001 fax 817-267-6100
Texas Student Housing Corporation
August 31,2000
The Colony apartments
Considerations for future operations at audit date of August 31, 2000 fiscal year
1) Colony owns 10 Quads
9 are leased to the Tower for a flat amount of rent
$21,600 per month fiscal year ended August 31, 2000
9 Quads x 4 units per Quad = 36 units leased x 9 months per year x $600 per month
for fiscal year ended 2001. Tower pays all expenses and bills students, etc.
Are they leased for a fair market value rent?
Revenue of above recorded on Colony books at above calculation. Tower records it's
amounts are gross revenue on the Quads based on amount rented to students.
2) Tower owes Colony through a due to Colony (liability) account on Tower Books
(Colony books have a corresponding receivable account)
At August 31, 2000 the Accounts Receivable consists of:: $174,164.63
3) Colony pays the Colony Lodging Incorporated an amount which should be equal to
The minimum interest payments. $603,448.00
Escrow for property taxes 100,808.00
Escrow for property insurance 15,000.00
Subtotal 719,256.00
These were deficient for fiscal 2000 into amount of $152,554.78
(See work papers attached)
Future cash flow must cover these expenses.
4) Will management fees now currently at $32,52 per month for the Colony go up due
to the loss of"economics of scale" provided by the Tower operations (& Forum for
2000) (but not in 2001 since Forum was not rented for this school year 2000-2001), if
the"Lodges Co" properties are not retained by Texas Student Housing Corporation?
Tower management fee is $139,992 and Forum was $27,504 for fiscal year ended
August 31, 2000.
Page 2—to be considered
5) Is the Colony budget properly and accurately based on history or anticipated
Operations strategies in fiscal 2001?
Note budget variances in all repair and maintenance expense accounts were
unfavorable again for a record consecutive year.
6) Colony has participation in the use of some SSRS controlled assets (Best Western
credit Card account) and the Tower operations for extended stay and guesthouse
billing which passes through the Tower's billing system.
7) Colony may have some liability on certain maintenance contracts such as security,
fire, or equipment leases.
8) Insurance settlement amounts must be reconciled and paid or adjusted before
inter— company accounts can be settled.
9) Consider deferred dorm income account as a liability to students if this property was
to be closed or have operations interrupted or ceased.
Texas Student Housing Corporation
Colony Apartments — Analysis of Net Cash Available for Debt Service
Fiscal Year Ended August 31, 2000
Revenues $1,456,864
Expenses Before Capitalizing any fixed assets $ 885,47 6 (1)
Net income before depreciation and interest expense $ 571,388
Minimum payments on Rossco (Colony Lodging note) $620,690
Shortfall fye 8/31/2000 $49,302
Net receivable balance due from Tower at 8/31/2000 per unadjusted general ledger
$124,164 (A)
(1) Expenses include the following cost which may be controllable-
Real and personal property taxes $117,342
Repairs, Maintenance, Improvements $306.737 (2)
TOTAL $424,079
(2) Includes Improvements, repairs and maintenance in excess of budget of$98,660 fye
8/31/2000.
(A)Net due from Tower per client general ledger before audit adjustment reflects a
receivable from Tower of$124,164, all of which was out$Janding at August 31, 1999.
Therefore in the current year this was not a net cash outflow for the Colony.
(3) Capitalized assets originally expensed as repairs and fttdintenance expense was
$237,900 for the year ended August 31, 2000
-'
_
Texas Student Housing Corporation
Accounts/Rent Receivable - Analysis ~ Tower
August 31v2000
Dorm Contract Balance Balance Balance
Receivable Accounts August 31, 1998 August 31, 1999 August 31, 208U
Dorm Receivable 01/00 $1.726`748.00 (A)
Dorm Receivable 88/00 $1.847.427.10 108.941.37
Donn Receivable 98199 $1.984,574.81 81,217.00 78.806.49
Dorm Receivable 97/98 90.156.91 71,808.98 71'808.88
Dorm Receivable 96/97 46'707.81 46.707.81 48.707.81
Dorm Receivable 95196 3.371.47 3.371.47 3.371.47
00.121 Guest Ledger 7,394.37 38.710.75 «1658.74>
Dorm Receivable A8 - UT 3.455.61 2.668.07 2.066.07
00.127 A/R Direct Bill 3,073.86 18316
�
Tnto|n
(A) -This receivable for academic year 2001/2000 corresponds to total deferred revenue on dorm
fnnn in the amount of
Analysis: Deferred (unoanl*d) down revenue August 31. 2OUO $3.778.005.47
less: Amount of Dorm Receivable above August 31' 2000 $1,726,748.00
Amount previously collected for unearned Dorm
rental ot August 3l. 2O0Q
Combined Cms-h Balance at August 31' 20OU
µ
O O O O O O
yyO W O.a yytW O C+ O W�O W O
LA
N H N
r�
o
o W In m O W - W W
N W m r o m O SJ O r
1.�
ulrruloNOa> wWOrm
� � \ �o+1 0 n0 �0+ {{off� X�077 0 �o+ �o++ �W++W+1 �W--++ �W+1 { tp xz
W C11Q6; Q `�i5 W 07 O7 W 507•. ' b o
0 0 0 0 0 0 0 0 0 0 to r
V W W N In r r W W W
C j Ql IP Ln Ol t r Q1 ') L, W .b !•C 1 ryy
22 ',d �(Dj
\__ t N N !} � [y N N N N N t~J N N
1.11 Ln oLnutwo0wo
oozbr000000000 }j _ � 1
r
I-L
Ul r n In J N O d W W r w m tY
O O O O O O O O W W W W I' ~
0 0 0 O O O O O O W W W W (D D
ro
8
to
V4 C"T
OR
rl
�
it N ;
N u
X it i
�• N p I
(v
\ N Ql m INI al m i Ln O m m o W o O O O
(V N N . . N N N N I r o 0 Oi O O O In O o 0 0
N W W X W W I o W 0 0 0 0 0 0 0 0
� a .a• �+ a a� m. I oo a� oa000000
\- -1 00 00 -3 n a `3 i oo �r 00000000 r•
t �\ N m O O O O m N m m I 00
y N \
�1 I
II N
it
!t N
it n I
n
11 n n i
It Ln L, N w t N r
N In In N In 1 0 In
N 0
N O O N O o 1 O O
q In 0 0 0 0 In U to Ut I In o
N N 0 0 0 0 a, H Cl m i R1 0 ft
It
w it I
11
B
IP p , In i In In 4� In � w N N N r r
Ln in N Ln O O N O Qt W In O In O In
.O O O O O O In In O m m 0 0 0 0 0 �1
m m N w m mj -j r Ln Ln to In vl o o o o o iW
W W 11 W W W W W W 0 0 0 0 0 0 0 0 0 0 C)
W W N W W � W W w iA 0 0 0 0 0 0 0 0 0 0 O
N C
" N O O O O N N N N N N N N 0 0 0 0 0 0 0 0 0 0 fN ft
P
a
1
7ole D > C:C—,S?f C c— :z U> KMC- 0 zoo
C:) C:) C)
C) C) c) C) C) e-o (r) (D
o C) C:) CD C) C) CD M �
0
0
C:
c -0
=3 CD 3
(n m " C
0) (D (n m cn CA cn cn cyl cn 0 =3
0
C:
PO P. ro
'0 o (D C) C) C� CD CD C) CD CD C) C) C) C/)
LD. 0 CD C) C) C) C� CD C) CD CD (D CD C)
0-
3 M EF
0 (n
0
rQ K) p) r-j r,-) K) r.) K) r") 0
(D CD m cn cn cn cn cn cn cn ol cn cn Ul z
0
pppppppppppp C,
0 C� 0 CD C� CD a CD CD CD CD (D
CD c) C) CD C) C> C) C) C) C) CD CD CD c
_0
a)
ATI
Z
C) 0 cn
CD CD 0 CD C) CD CD C) CD CD C) CD C) 0
co co co CD �u 0
L
131.
0
0 Z
>
--4
m m m m m m m m 0, cn cn C', CL m
:-4 :-4 :-4 :4 0 Z M
PO -W -W -W W W -W -W -W CD CD C) CD z Z
---4 -4 ---J -4 M M M M cCDO Cf) --j
Cf)
CL cn
m co m co w (D co (D co (D m
m
c
0 m
cyl I C) T
0) CTI CTI CTI -rl ul cyl cn Cil 0) >
0
r) C m C C D ci 0000 E o
(D CD C5 m (D C) CD CD CD CD C) (5 u
:T- p p .o. p p p p p p C) p >,<
4 (D CD -4 0 (D CD CD CD C) C) (D
co CD C) 00 o C) CD C) C) CD C) C)
N 0) CTi 01 -4 CD
(D IQ -W-63 -W -W -W -M -W -(D -C, -C:) -C)
0) -4 ---1,--4 -4 --4 --4 -4 --J CF) 0'7 (3-) 0)
CT) cy) (r) 0-) m 0) (3) 0) 0) co D) (3)
QD (D (0 (D (D (ID CO CD
JAN. -02° 96 (TUE) 15,37 PRINCIP", FIN. SEC TEL:2141, QR0 6946 P. 02
Texas Student Housing Corporation
(Colony Complex, Forum Complex & `dower Complex)
Installment Purchase Obligations
Minimum Payment Schedule
I.odgeco Rossoo
Total University The l��1® The
-Year Payment Tower Forum -
Colony
10`93
1996 $ 2; � 6;�2 S 240,000 S 413,793
.,00 Gu 23 L�4�3 1997 2,700,000 1,964,483 270,000 465,517 if6j . 3 k7 -3
3,000,000 2,182,759 300,000 Lt 316 2, 17,241 - .-
�-7SkL 1999 3,300,000 2,401,034 �p 330,00 �P
7� 2000 3,600,000 2,619,310 ,�1b �7� 360,000 30 OOE 6
7_r 2 2001 4,000,000 2,910,345 A 5-7-9 400,000 5133 689,655 �/
2002 4,000,000 2,910,345 400,000 689,655
2003 4,000,000 2,910,345 400,000 689,655
2004 4,000,000 2,910,345 400,000 689,655
2005 4,000,000 2,910,345 400,000 689,655
2006 4,000,000 2,910,345 400,000 689,655
2007 4,000,000 2,910,345 400,000 689,655
2008 4,000,000 2,910,345 400,000 689,655
2009 4,000,000 2,910,345 400,000 689,655
2010 4,000,000 2,910,345 400,000 689,655
2011 4,000,000 2,910,345 400,000 689,655
2012 4,000,000 2,910,345 400,000 689,655
2013 4,000,000 2,910,345 400,000 689,655
2014 4,000,000 2,9107345 400,000 689,655
2015 4,000,000 2,910,345 400,000 689,655
2016 4,000,000 2,910,345 400,000 689,655
2017 4,000,000 2,910,345 400,000 689,655
2018 4,000,000 2,910,345 400,000 689,655
2019 4,000,000 2,910,345 400,000 689,655
2020 4,000,000 2,910,345 400,000 689,655
2021 4,000,000 2,910,345 400,000 689,655
� c- L.